US Farm Income Up 24% in 2010
Sep 02, 2010
Agriculture continues to outperform in 2010 and be one of the bright spots in a very uncertain economy. The USDA now estimates that net farm income will rise 24% in 2010 due to higher returns for soybeans, cotton, and livestock producers. The department also raised its estimates of U.S. farm exports due to strong demand for U.S. grain due to the drought in Russia and Eastern Europe and China’s unexpected transition to a net corn importer.
“Today's reports are encouraging news. They show that while American agriculture has struggled through difficult economic times…the hard work and resilience of America's farmers and ranchers have helped put American agriculture on the road to recovery,” said Agriculture Secretary Tom Vilsack.
We see today’s report as a first step in the global agriculture boom. Rising farm income and cash receipts translates into more equipment purchases, higher fertilizer use, and the desire to increase production numbers.
Net Farm Income
The USDA estimates that net U.S. farm income will be $771 billion in 2010, up 24% from 2009 and $12.3 billion above the 10 year average. Cash receipts are expected to increase 6.5%, due mainly to higher livestock receipts.
Livestock producers, led by dairy and pork, are leading the rebound this year. Cash receipts on milk are expected to be up 26% compared to 2009 and income from pork is expected to rise by 25% due to reduced production and rising demand domestically and overseas. Cash receipts for cattle and calves are expected to increase by roughly 11%.
Corn sales are expected to be below their 2008 high due to a lower average annual price and high production estimates in 2010. Currently, the 2010 corn crop is forecast to set new records for yields and production. Soybean sales are expected to rise 9% from 2009 to a record annual value due to an increase in exports. Demand for soybeans may overtake production in 2010 if there is a strong recovery in biodiesel production. Wheat sales are estimated to decline in 2010 due to a $0.50 lower annual average price partially offset by a 36% increase in exports.
The USDA estimates U.S. agricultural exports to rise 5.1% to $113 billion in 2010, driven by the drought in Russia. Reduced competition from Russia will allow U.S. wheat farmers to exports $8.1 billion of wheat, a 35% increase from the previous USDA forecast.
The transition of China from a net exporter of corn to a net importer of corn has also been beneficial for U.S. agricultural exports. China has historically been self-sufficient in corn production, but demand is starting to outpace supply as the nation continues to consume more protein. Chinese imports of corn will grow from 1.7 million tons in 2010 to 5.8 million tons in 2011, and to 15 million tons in 2014-15 according to the U.S. Grains Council.
“Another factor driving this recovery is an increase in income from exports. Today, USDA is excited to announce that we are raising our forecast for agricultural exports for Fiscal Year 2010 to $107.5 billion – the second highest year on record. This a $3 billion increase from the May forecast, and an $11 billion increase over last year. And Agriculture is one of the only major sectors of the American economy with a trade surplus – expected to be $30.5 billion this year,” noted Vilsack.
We expect agriculture to continue to perform well over the next decade and see 2010 as the beginning of a larger agriculture boom. Demand is continuing to outpace production and ending stocks are already at low levels. As ending stocks continue to trend towards zero, the marketplace will begin to recognize the value of agriculture.
Jim Rogers said, “It’s going to be the 29 year old farmers who have the Lamborghinis.” It is either time to get a tractor or set up a Lamborghini dealership in Iowa.
Read more about agriculture and farmland at http://farmlandforecast.colvin-co.com.